Santander, HSBC, Lloyds, Halifax, Nationwide, NatWest, Barclays customers issued £697 warning

Customers of seven major banks have been warned over overdraft fees. Santander, HSBC, Lloyds, Halifax, Nationwide, NatWest, Barclays customers have been warned, on average, a fifth of UK current account holders are £697 overdrawn every day, paying £278 per year in interest fees.

Major providers including HSBC, Lloyds, Halifax and Nationwide all offer an authorised rate of 39.9%. The ease at which money owed to your bank provider can continue without realising led to Alastair Douglas, TotallyMoney CEO, describing it as a “ghost debt”.

Douglas said: “There’s no separate card, account, or app – and if you’ve been with your bank for years, you might not remember ever applying for one. That means you might not even really notice if you’re using it, especially if you don’t regularly check your bank statements. But the truth is, overdrafts are credit products, and just like a loan or a card.”

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Douglas added: “So it’s really important that you treat it like any other form of borrowing, use it responsibly, and keep an eye out for cheaper and better alternatives. You might not realise it, but some high-street banks are charging overdraft customers almost 40% interest, making them one of the most expensive mainstream ways to borrow.”

Santander charges 39.94 per cent on overdrafts, Natwest 39.49 and Barclays charges 35 per cent. Andrew Hagger, Personal Finance Expert at Moneycomms.co.uk added: “There was a time when authorised overdraft rates were pretty much on a par with standard credit card rates, but now it’s very different, with overdraft rates heading towards double the rate of credit card interest.

“Paying from 35% to nearly 50% for an overdraft is difficult to justify, especially as this is for an agreed overdraft limit.If you’re only borrowing for the odd day here and there it’s less of an issue, however if you’re in the red for a couple of weeks or more each month, these rates will only make your financial position worse.

“Rates of 35% or more are usually associated with borrowers who have previous credit issues and are classified by banks as ‘subprime’ borrowers.Using a credit card can be a far more cost-effective way of managing your cash flow these days, even more so if you’re able to clear your statement balance in full each month.

“It’s easy to fall into the habit of relying on your overdraft month after month and the high cost will soon make a bad situation far more serious.”